Targeting scope emissions for utility decarbonization

In 2000, the Seattle City Council set a net-zero greenhouse gas (GHG) emissions goal for the city’s municipal utility. Five years later, Seattle City Light became the first electric utility in the country to achieve a 100% carbon-reduction target. Now, more than 500 U.S. electric utilities have established carbon-reduction targets, either voluntarily or following binding statutory requirements. These targets cover utilities of all types, sizes, and geographies, and the commitments range from achieving a 100% renewable energy supply by 2025 to reaching net-zero GHG emissions by 2050. The Smart Electric Power Alliance (SEPA) defines “100% carbon-reduction target” to include 100% carbon-free energy targets, 100% clean or renewable energy, and net-zero carbon or GHG emissions targets.

The growth in utility carbon-reduction commitments over the past few years has been impressive, but the true impact of these commitments lies in the details. Today, leading utilities are bolstering their commitments by defining the breadth of included emissions and by publishing publicly-available action plans. These additions bring critical transparency and accountability to electric utility sector decarbonization efforts.

Adopting a common framework for transparency and accountability
Results from the SEPA 2023 Utility Transformation Profile show that 50% of responding utilities with a carbon-reduction target utilize the GHG Protocol Corporate Standard to define the scope emissions of their targets.

Addressing scope 3 emissions
Scope 3 emissions accounted for 75% of the U.S. power sector’s total carbon emissions in 2019, yet only 15% of utilities participating in the latest Utility Transformation Challenge have set a carbon-reduction target that includes Scope 3 emissions.

Electric utilities which purchase power from the wholesale market face particular difficulty in addressing Scope 3 emissions. To-date, inclusion of Scope 3 in commitments has been limited to a mix of several vertically-integrated utilities (e.g., Dominion Energy; Duke Energy) and utilities operating in deregulated markets (i.e., National Grid). More utilities should consider strategies to address these indirect emissions.

Each utility’s carbon-reduction journey will be unique, influenced by factors such as resource availability, market dynamics, and regulatory environment. The most important steps for utilities to reduce carbon vary by business model, for example:

• A vertically integrated utility’s greatest carbon reduction opportunity is its owned generation (Scope 1). This includes shifting from fossil-based generation to lower carbon generation, improving the efficiency of existing power plants, expanding demand-side management offerings to reduce electricity consumption, and pursuing emerging technologies to capture and store emitted carbon. The majority of Utility Transformation Challenge participants sourced 50% or less of their retail electricity from carbon-free energy sources in 2021. Vertically integrated utilities will need to make significant financial investments to reduce their Scope 1 emissions, and will need guidance facilitating changes to keep up with state-level carbon-reduction mandates while ensuring equitable retail rates and reliability.
• A wires-only utility does not own any generation, and is challenged with reducing upstream emissions from its retail supply (Scope 3) through wholesale market purchases. Wires-only utilities can more directly reduce carbon by electrifying their fleets (Scope 1), procuring cleaner energy for and investing in energy efficiency at company facilities (Scope 2), or upgrading grid infrastructure and demand flexibility capabilities to reduce line losses and the need for carbon-intensive peaking plants (Scope 3). Utility Transformation Challenge participants are engaging in all of these areas.
• For electric utilities with a gas business, Scope 3 emissions from customers’ use of natural (methane) gas contribute a substantial share of their carbon footprint. Gas energy efficiency, carbon capture, and a balanced path to beneficial electrification are critical efforts.
  • National Grid U.S. is an electric and gas utility serving more than 20 million customers in the Northeastern U.S. Nearly 65% of National Grid’s 2020 emissions came from customer use of natural gas. The utility is working to decarbonize its natural gas network with renewable natural gas and green hydrogen as part of their strategic plan to achieve net-zero GHG emissions for scopes 1, 2, and 3 by 2050.
  • Puget Sound Energy (PSE), an electric and gas utility serving 1.2 million electric customers and over 900,000 gas customers in Washington, has a goal to reach net-zero carbon emissions for customer natural gas use by 2045. PSE has implemented a number of initiatives to reduce natural gas consumption, including investing in renewable natural gas, implementing a targeted customer electrification initiative, and expanding voluntary customer programs such as its carbon balance program that allows customers to buy offsets for their natural gas consumption.
• For generation and transmission utilities that generate and deliver wholesale power to municipal utilities and electric distribution cooperatives, two core paths to carbon reduction exist.
  • First, these utilities– including publicly-owned wholesale utilities and investor-owned generation and transmission cooperatives– can reduce carbon emissions from their generation facilities and increase the supply of carbon-free energy to the wholesale market. Generation and transmission utilities around the country have proposed strategies that include continuing to operate existing carbon-free baseload generation, retiring carbon-intensive generation, adding new renewables and storage, facilitating grid modernization, and determining where offsets may be useful for any remaining carbon-intensive generation. This suite of activities also facilitates member-customers’ pursuit of Scope 3 carbon reduction.
  • Second, as the New York Power Authority explains, is for generation and transmission utilities to use their scale and resources to enable wholesale customers to pursue “…customer-centric decarbonization opportunities that include energy efficiency, distributed solar generation, customer-sited storage and electrified transport.” Utilities in this segment face challenges including coordinating transmission infrastructure expansion, storage, grid modernization, and enabling rules and mechanisms.

The path ahead
Electric utilities face an unprecedented challenge as they work to fulfill carbon-reduction commitments. Download the SEPA 2023 Utility Transformation Profile to learn more about how leading utilities are improving the strength, depth, and transparency of their carbon-reduction targets.